Economic Worries For The RBI Policy To Address: 5 Points

The Reserve Bank of India will likely hike interest rates for the third time since the current fiscal year began in April.

Economic Worries For The RBI Policy To Address: 5 Points

RBI'S policy amid pressing economic worries

The Reserve Bank of India will likely hike interest rates for the third time since the current fiscal year began in April. But the central bank's dilemma has multiplied, with pressing economic risks becoming a deeper concern for policymakers.

Here Is Your 5-Point Guide To The Story:

  1. Inflation above the RBI's upper threshold of 6 per cent for this calendar year: India's inflation has languished at a touch over 7 per cent, above the central bank's upper end of the 2-6 per cent target since January and expected to hold around level for the rest of this year. 

  2. Rupee's breach of 80 per dollar for the first time ever: The rupee has plunged to repeated record lows since the start of the year when it was last changing hands at 74 per dollar. The Indian currency's rapid plunge has sent shivers down the markets even as the centre and the RBI have maintained that the rupee's slide is more a global trend.

  3. India's ballooning trade deficit to record highs: Trade deficit in Asia's third largest economy widened to an all-time high of $31 billion, data on Tuesday showed, prompting concerns about the country's ability to fund its current account deficit and hurting the outlook for the rupee.

  4. Forex reserves falling to the lowest in almost two years: India's forex reserves fell by over $1 billion in the latest week, down for the fourth straight week on the rupee's plunge to its all-time lows.

  5. The interest rate differential with the US, UK and recession fears there: Indian started the current rate hike cycle after the US and UK and less aggressively compared to the central banks there, which has weighed on the rupee. The risk and worries though of the contagion risks of a recession in those countries. 



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